Inflation sped up in September as rent, food prices surged
Consumer prices rose at a faster pace than expected in September as inflation accelerated for the second straight month, according to data released Thursday by the Labor Department.
The consumer price index (CPI), which measures inflation, rose 0.4 percent in September and 8.2 percent over the past 12 months, according to the Bureau of Labor Statistics (BLS). Economists expected prices to rise roughly 0.3 percent last month and 8.1 percent over the past year.
The BLS pinned the September boost to inflation on rising shelter, food and medical care prices, which overwhelmed a 4.9 percent drop last month in gasoline prices. Without food and energy products, which tend to be more volatile in price, consumer prices rose 0.6 percent.
“The Fed is trying to get inflation under control, but you wouldn’t know that looking at today’s CPI data,” said John Leer, chief economist at Morning Consult.
“While energy prices are falling, services inflation in shelter and transportation is running hot, forcing consumers to make tough spending decisions through year-end.”
September marks the second consecutive month of surprisingly strong inflation, which has remained near four-decade highs for nearly a year.
The persistence of rapid price growth will likely keep the Federal Reserve on track to keep raising interest rates to levels meant to slow the economy and risk triggering a recession.
The economy has slowed since the Fed began a rapid series of interest rate hikes in March, bringing its baseline interest rate range up from near zero to a span of 3 to 3.25 percent last month. The Fed is almost certain to hike rates by another 1.25 percentage points before the end of 2022, a move officials admit would likely cause higher unemployment.
The Fed is aiming to beat inflation by slowing the economy with higher interest rates. As rates rise and remain at levels meant to curb consumer and business spending, firms will face pressure to keep prices stable and hire workers at lower wages to compensate for lower sales.
Economists have become increasingly concerned that the Fed will keep hiking rates to a level that would cause a recession, all while the global economy is already falling into a steep slowdown. Fed officials are hopeful they can bring inflation down without derailing the economy, but have warned that it will be impossible to curb price growth without “pain.”
“We’re certainly seeing the initial signs of a significant slowdown in global activity with a dramatic slowdown in Europe, increasing stress across emerging markets, and an accelerating cooling of activity in the US,” wrote Gregory Daco, chief economist at EY-Parthenon, in a Thursday analysis.
“There is growing concern that the global waves of uncertainty and the financial market stress will eventually affect the US and lead to a more profound contraction than our baseline for a mild recession.”
While a recession likely wouldn’t hit the U.S. until next year at the earliest, more than a year of high inflation has already taken a toll on President Biden and the Democratic Party’s hopes of retaining congressional majorities. Republicans have highlighted the rapid run of prices under Biden’s watch and are hoping inflation and economic concerns help them capture the House and Senate in the upcoming midterm elections.
“Main Street businesses continue to struggle with higher prices and there’s no end in sight. Thanks to President Biden’s bungling of the economy, they will either cut jobs or pass costs on to consumers who are struggling to pay their bills in this cruel economy,” said Rep. Kevin Brady (R-Texas), ranking member on the House Ways and Means Committee, in a Wednesday statement.
Biden and Democrats acknowledge that inflation has run far too high, but have touted the relative strength of the US economy to beat back concerns about price growth. The U.S. has added 420,000 jobs each month on average since the start of 2022, the September jobless rate of 3.5 percent is even with its pre-pandemic level and consumer spending has stayed strong even amid rising prices.
Even so, Biden admitted Tuesday night the U.S. could see a “slight recession,” but still believed the country would avoid one.
“It hadn’t happened yet,” Biden said when asked by CNN’s Jake Tapper if Americans should prepare for a recession. “I don’t think there will be a recession. If it is, it’ll be a very slight recession. That is, we’ll move down slightly.”
Updated at 9:35 a.m.